Netrealty

Selling by Tender

Tenders are a less popular method of selling real estate in Auckland, however it definitely does still have its place. Here we explore the process and its advantages and disadvantages for Vendors…

Process: The pre-close of a tender is very similar to an auction campaign and consists of an intensive three to four week marketing program with a combination of print and internet advertising to capture the attention of potential buyers in the market for that type of property.

Like auctions, the vendor can sell prior to the close of the tender provided it has been advertised "unless sold prior" however at Netrealty we would recommend another method of sale if a vendor is not willing to wait until the tender is officially closed, before accepting any offers.  Offers are usually submitted in sealed envelopes and are accompanied by a deposit cheque. The offers can be conditional on whatever the buyer wants to include (eg: finance, building inspections, etc) 

The tender document usually requires the offer to remain open for acceptance by the vendor for between two to five days.  However, if it is highly conditional, it may not come to fruition even if it is accepted. If the vendor decides to accept a conditional offer, it is recommended that they also get a back-up offer, just in case the preferred offer does not go unconditional later on. 

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The advantages and possible disadvantages of the tender process for vendors

Advantages:    

  • The vendor has control of the process
  • The vendor can negotiate with any of the buyers, to the exclusion of all others, if they wise
  • The sale could be unconditional (as with an auction), but is not necessarily
  • There is a perceived competition between buyers which usually results in a good sale price
  • If all goes well, the property is only on the market for three to four weeks (less hassle with open homes and viewings)
  • The process is confidential, so the final sale price is not known until it goes onto the public records (about two months after settlement)
  • Both conditional and unconditional buyers can participate in the tender process.
  • Motivated buyers will usually put in their very best offer straight away, so the need for a strong under bidder is not necessarily required to drive the final sale price up
  • The difference between the highest offer and the second highest offer can be tens of thousands of dollars, whereas with an auction the bids are transparent and are only just above each other (usually only about $500 at the end)
  • A tender can be a less costly process for buyers as they can make conditional offers and, unlike auctions, they don’t need to incur costs on building inspections etc until they have an agreed purchase price

Possible disadvantages:

  • Buyers can be uncomfortable with the process, as they don't like to pay more than they have to for the property
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